Right to Restrict. After a lengthy trial, the association prevailed. Mr. Watts appealed and lost. The court's rulings are significant: (i) associations have the right to restrict short-term rentals, (ii) boards can impose a reasonable fee to offset expenses associated with renters, and (iii) courts should defer to boards on decisions related to the maintenance, control and management of common areas. To read the court's decision, see Watts v. Oak Shores. (Also see Almanor Lakeside Villas v. Carson.)

Adopting Restrictions. A restriction that rentals cannot be less than 30 days is not a prohibition and has been deemed reasonable by the courts. (Mission Shores v. Pheil.) If associations want to restrict or prohibit short-term rentals, they can do so in their rules without amending their CC&Rs. Most associations already have provisions in their CC&Rs that give them the authority they need. The first, found in many documents, prohibits owners from using their units for hotel-like operations. The second prohibits owners from running a business in the development. The third is the nuisance provision found in all governing documents. And, finally, most documents give boards broad powers to adopt rules and regulations for the benefit of the membership.

Coastal Associations. There is a caveat for associations within the jurisdiction of California's Coastal Commission. Amending governing documents to restrict short-term rentals requires approval by the Coastal Commission. "The decision to ban or regulate short-term rentals must be made by the City and Coastal Commission, not a homeowner’s association." (Greenfield v. Mandalay Shores).

Recommendation: Associations wanting to restrict short-term rentals and/or impose fees on landlords should have legal counsel review their documents and make recommendations. The growing body of case law regarding short-term rentals must be taken into account when amending governing documents.